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5) Well, it's hard to find a lot of them. But, roughly, it looks like they made about $1-2b of revenue last year, had moderately high expenses, and had something like ~50m customers, give or take.

6) The first thing that jumps out: FTX traded about 2x what Coinbase did last year. FTX did not make $1.5b of revenue. What's going on there?

7) Well, their fees are higher than FTX--something like 4x as high! But that still doesn't explain it.

8) So what's going on? Well, have you ever tried to buy BTC using the Coinbase app?

9) Now, I want to tread lightly here--don't throw stones in glass houses! But I tried to buy $8 of BTC. The price I got was... $40,422. BTC is currently trading at $35,250. That's a 14.5% fee. 14.5% is a lot. (Maybe people should check out FTX!)

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10) Well ok then. So, mostly this is the "Coinbase fee". This isn't a % fee, it's a $ fee; in this case, $0.99. On a $8 trade. So that's 12% right there. The other 2.5%? Well, that's the spread.

11) Ok, so now things start to line up more. If they traded $500m/day, and made $1.5b, that means that Coinbase made about 1% on their average trade. Which, presumably, is some blended rate between ~8bps on their "Coinbase Pro" trades, and 1-10% on their app trades.

12) A lot of people complain about Coinbase downtime, or lack of features, or ratelimits, or withdrawals. I wonder if Coinbase even cares. Its 'pro' fees can't have been more than 10-20% of its revenue, really: 8bps*$500m*365 = $150m.

13) Coinbase doesn't make money when people use its API, or go to prime.coinbase.com, or use their ratelimits. Coinbase makes its money when your high school classmate decides to buy their first $25 of BTC on the app.

14) So: a) Coinbase does, actually, make real money! This isn't Bakkt 2.0. b) ftx.com/trade/CBSE/USD might be worth a lot. Maybe it shouldn't sell itself short. twitter.com/SBF_Alameda/st But there's another interesting question here. What happens when volumes skyrocket?

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12:16 PM · Jan 12, 2021Twitter Web App

Dec 25, 2020

1) IPOs, listings, and orderbooks: Why ftx.com/trade/CBSE/USD might be good for Coinbase

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15) For FTX, the answer is pretty simple. Just go to ftx.com/FTT. Last week, FTX had its first ever $2m buy/burn. Today, we're having a $3m buy/burn. More volume has exactly the expected effect.

16) For Coinbase.... I'm actually pretty curious. Today, Coinbase has $5b of volume. That's a lot! It's also half of FTX.

17) If this kept up for a year, would Coinbase make $300m? Or $15b? *Which* volume goes up? Is it

@AWice

? Or is it his high school classmate buying their first BTC? Is it

@cmsholdings

's bots, or Dan while he's bored in a meeting? Are they paying 1-10bps or 1-10%?

18) I don't know! I wish I did. All I can offer is the following. Here are some graphs from FTX.

19) On FTX: --Volume is up about 10x from a month ago --Active userbase is up about 1.5x So if FTX is any guide, most of the volume growth is the heavy duty traders; retail growth is smaller. Which would imply that Coinbase's revenue is up more like 50% than 500%.

20) But maybe Coinbase isn't like FTX. Maybe Coinbase really did have 10m users load their app to buy $100 each of BTC yesterday, each paying about $3 in fees. That would be, at least from Coinbase's perspective, impressive.